David Foss : Sure, Jason. I wouldn’t say that there’s a significant notable change in the composition of the pipeline. It’s — we have a number of core deals. So again, we just signed 14 — or announced 14 deals here. That is not slowing down. I would say that the size of those core opportunities, meaning the size of the institution, has gone up and is continuing to go up. So, we’re being recognized among the larger community and regional bank space as being a real player. And so, I think the overall size of the institutions bank and credit union has gone up. But then if you look at the rest of the mix, most of it are the things that I highlighted when I was kind of going through with JD, the hot topics today, what’s driving that success.
It’s this all this brand-new technology that we have — that we’re offering today. So, two years ago, almost nothing of those except Banno was on the list. But now all these things have been rolled out in the last couple of years, and they are dominating the sales process today because they’re brand-new technology, people have been hungry for these things, a Banno fraud solution that uses AI, I mean everybody is dying for that type of technology. And so here we are, we’ve just gone live with Financial Crimes Defender. And so much of it is because of these brand-new things that have been rolled out in the last year or two or three that’s what’s dominating a lot of the sales conversations today, and that’s what’s driving a lot of the strength in the pipeline because you look at what’s happening with our competitors in the space, there’s really nothing innovative that’s been coming out in the last couple of years.
And here, Jack Henry has a long list of brand-new innovative solutions.
Jason Kupferberg: And then on competitive landscape in core, are you guys seeing a broader range of competitors as you continue to move a little bit further up market? Maybe others are trying to move a little bit more down market? Just how are competitive dynamics in core evolving?
David Foss : Yes, I’d say no change at all. There’s we compete against the traditional players. We’ve competed against the traditional players forever. There have been upstarts, trying to either come into the U.S. internationally or start from scratch, and none of those are really even showing up in RFPs with the exception of once or twice a year. So, I wouldn’t say there’s any change of any kind on the core side as far as the competitive landscape.
Jason Kupferberg: Okay. Just a housekeeping one for Mimi on free cash flow. I know you’re maintaining the guide. I’m assuming no changes in legislation. But fair to say that Q3 would be fairly subdued and then followed by a stronger Q4 just based on typical seasonality.
Mimi Carsley : Yes, I think that’s fair to say. And I think if anything, we’re reiterating the guide, but there’s probably a little bit of upside there, even without legislative change.
Operator: And next, we have a question from David Togut of Evercore ISI.
David Togut : Thank you. Good morning, and congratulations to you both, Dave and Greg. Dave, I know when you initially became CEO eight years ago, one of your major priorities was the card migration platform, moving your kind of back-office processing of debit cards over to the back office of what was then First Data now Fiserv First Data and then obviously, adding the capability to do credit card processing on top of that. Where do we stand overall in this initiative in terms of the cost savings that’s delivered to Jack Henry? And then where are you in terms of the uptake of the credit card processing offering?
David Foss : Yes. So, I’ll start, but I’ll ask Greg is a lot closer to the details as far as where we are today. So, from my perspective, this has been a wildly successful initiative for Jack Henry. And at the time, I’ve been in this business a long time. And the idea of bringing three companies together to deliver a solution that’s going to replace two different platforms all to one platform was a very, very big daunting project. But now looking back on it, it’s been incredibly successful for our company as far as hitting the targets that we expected to hit financially for Jack Henry as far as the sales opportunities that it’s created, which have been very significant over the past few years. So, I look back on that project as a really significant success.
Now the thing I will emphasize before I ask Greg to chime in here, I said all along, you are not going to see the credit card side of this business become anywhere close to what the debit cards had side is we were doing. We were focused on the credit card side because we had certain customers who said, we want to process both debit and credit with the same provider, and we want to make sure that we have that option for them. And so, I’ll ask Greg just kind of talk about where we are today.
Greg Adelson: Yes, specifically on the credit card. So, we — roughly between full-service card, agent card in-house card. We have roughly over institutions. And so — and I think part of the challenge is some of the smaller institutions which is why we came out with an agent program was they really didn’t want to go in with the full service just based on resources and some of the risk and things like that. So, I think we have done — the team continues to sell it. We continue to have the number of deals come in just not to the same level as debit continues to grow. But also, we’re continuing to add feature functionality to the services. As Dave mentioned, it is a tri-party relationship, and we continue to work with the other two parties to make sure that we stay innovative and ahead of the game.
So, the relationship has actually gone well, which has actually contributed to the fact that the growth has been significant as well. So, both from a service side and a transaction processing side.
David Togut: And just as a follow-up, Jack Henry outperformed on gross margin versus our model. And I know you initiated a media program a few quarters ago, which Mimi, I think you described. To what extent did VEDIP uptake actually helped gross margin in the quarter? So, like stripping out any onetime charge benefit focusing more on like sustainable reductions in cost of labor.
Mimi Carsley : Yes. I wanted to say that it had a significant impact. That was a one-time charge related to kind of severance and the program. As we said, we didn’t do it for kind of in-year savings. This wasn’t a sneaky kind of design risk plan. This was a very talent-focused plan to ensure that we had the type of talent for the future needs of the organization. And in fact, the majority of those roles have been backfilled with rising talent in the organization, some at lower levels in the organization as we zero-base budget every position the majority of those roles have been filled. So, I wouldn’t say it was a significant reason for the margin expansion or the expense savings this quarter.
David Togut: Understood. Thank you.
Operator: The next question will come from Vasu Govil of KBW.
Vasu Govil : Hi, thanks for taking my question. I want to add my congratulations to Dave and Greg. My first question is on Banno. It seems to have had an outstanding quarter in a number of new wins. And I caught that Banno business was a contributor there. But even without that, it seems like the number of wins were significantly higher than the quarterly average. Any call-outs on that? And apologies if I missed it, but did you give us the number of customers in millions that you usually give every quarter?
David Foss : The number of customers that we signed. Is that what you’re asking, Vasu?
Vasu Govil: Within Banno, I would just [indiscernible].
David Foss : Yes, 11 million. Yes, we surpassed 11 million at the end of the quarter, so I quoted that 11 million. And so no, there’s nothing — I think part of what happened here is I quoted the number for the Banno business wins. And then beyond Banno business with the regular Banno platform, that number was up. I think the reason for that is because there were people out there waiting for Banno business before they would also sign to go at the regular Banno platform, which includes retail. And so that’s the significant point now that Banno business is in market generally available, we had customers who said, “Okay, I’ve been holding off because I want to do both at the same time, both Banno business and regular Banno.” That would be the only callout that I would have as far as the size of the wins.
Vasu Govil: And just in terms of relative revenue opportunity, if you’re just selling Banno regular versus Banno business? Is it a 2x opportunity? Is it greater on the Banno business side?
Greg Adelson: Yes. So, I think one thing that just to make sure that we clarify. So, you have to have Banno Retail to have Banno business. So, one of the things that Dave was just alluding to is that some of the folks who are waiting to get Banno business — or Banno retail is because they’re waiting on Banno business and they wanted them at the same time. You can buy Banno retail without buying Banno business, but you have to have retail to get the business side. So back to the 2x comment, I don’t think it’s a 2x component. It is an additive component to ensuring that, one, that we get the retail and we continue to add fee structures to that based on how we model that. But I wouldn’t call it a 2x.
Vasu Govil: Understood. That’s helpful. And then a quick one for you, Mimi. I appreciate that the midpoint of the revenue guide didn’t change, but it does look like you took off the top end just a little bit. And I know you called out the card production slow down. Was that the bigger driver or any sort of other callouts on how you see that evolving?
